Question

Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $350,000 of manufacturing overhead for an estimated allocation base of 1,000 direct labor-hours. The following transactions took place during the year: Raw materials purchased on account, $250,000. Raw materials used in production (all direct materials), $235,000. Utility bills incurred on account, $69,000 (90% related to factory operations, and the remainder related to selling and administrative activities). Accrued salary and wage costs: Direct labor (1,075 hours) $ 280,000 Indirect labor $ 100,000 Selling and administrative salaries $ 160,000 Maintenance costs incurred on account in the factory, $64,000 Advertising costs incurred on account, $146,000. Depreciation was recorded for the year, $82,000 (75% related to factory equipment, and the remainder related to selling and administrative equipment). Rental cost incurred on account, $107,000 (80% related to factory facilities, and the remainder related to selling and administrative facilities). Manufacturing overhead cost was applied to jobs, $???. Cost of goods manufactured for the year, $870,000. Sales for the year (all on account) totaled $1,700,000. These goods cost $900,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were: Raw Materials $ 40,000 Work in Process $ 31,000 Finished Goods $ 70,000
4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
4B. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.

Answer 1